Nice! It looks like I have my software pick of the week early this week:
What is WinToFlash
WinToFlash starts a wizard that will help pull over the contents of a Windows installation CD or DVD and prep the USB drive to become a bootable replacement for the optical drive. It can also do this with your LiveCD.
You don't have to worry about scratches on the disc or misplacing your original media discs once you transfer their contents to the flash drive. The optical drive is quickly becoming a thing of the past, especially in office environments, as media is shifted to the cloud.
Note that this works with XP and Vista as well as Windows 7.